BusinessWorld: Peso gains cost OFW families P24.3B

Filipino families relying on remittances from relatives working abroad lost a total of P24.3 billion in earnings in the nine months to September due to the peso’s rapid rise, but the shortfall would have been greater had it not been for the strengthening of other currencies against the US dollar, the Bangko Sentral ng Pilipinas (BSP) said. The appreciation of other currencies against the greenback trimmed the losses by P2.4 billion, according to a central bank study. "The loss would have been higher at P26.7 billion if not for the gains realized from the currency movements in some host economies vis-a-vis the US$," the "Impact of Currency Movements on Overseas Filipinos’ Remittances" study states. A central bank official said the findings proved that many of the eight million overseas Filipino workers (OFWs) are paid by their employers in the currency of the host economy. "The findings show that our OFWs are not exactly worse off because of the peso appreciation against the US dollar," BSP deputy governor Diwa C. Guinigundo told BusinessWorld. "The reason is that most of them are also paid in currencies of the host economy, most of which are appreciating against the US dollar." Among the OFWs who gained from the greenback’s weakness were those deployed in Canada, Australia, Italy and Germany, whose currencies have continued to assert their strength. Monetary officials said the net gains and losses were computed by converting the remittance data per country in 2006, all expressed in US dollars, to host country currency using the average exchange rate in 2006. The gain or loss as a result of the peso appreciation against the US dollar was computed by "comparing the peso equivalent of the remittance in September 2007 with the peso equivalent in January 2007." Economists, however, said OFWs continue to lose out as the bulk of their earnings remains denominated in US dollars as stipulated in their work contracts, regardless of the currency of the host country. "The bulk of the OFWs’ remittance earnings is gauged in terms of US dollars. Even if you work in London, if your contract is in dollars you still lose," said Raul V. Fabella of the University of the Philippines’ School of Economics. "You can say that there were a few gainers but only a few are paid in the local currency. A majority suffered," University of Asia and the Pacific economist Victor A. Abola said. Based on 2004 data on OFW stock prepared by the Commission on Filipinos Overseas, about 34% of these workers get salaries denominated in the local currencies of their host countries. More than 65% of the remittances, meanwhile, are denominated in the US dollar. "Whether your contract is in pounds or US dollar, it is within the power of the BSP not to make you lose," Mr. Fabella pointed out. Both Messrs. Fabella and Abola said the peso’s appreciation should be pegged on the Chinese yuan, which gains by 2-3% a year. "If you want to remain competitive, the benchmark should be the yuan of China, where we’re losing out our manufacturing," Mr. Abola said. - M. E. I. Calderon, BusinessWorld